New car prices set to rise in 2017, warns industry body

New car sales hit a record high in 2016, but that surge is set to be curbed by price increases over the next 12 months...

Jim Holder

5 Jan 2017 00:01 | Last updated: 14 Jun 2018 00:03

New car prices are likely to rise in 2017, leading to a drop-off in sales following a record-breaking 2016 in which 2.7m new cars were registered.

The warning of an estimated 5% drop in new car registrations over the next 12 months was made by the chief executive of the Society for Motor Manufacturers and Traders (SMMT), Mike Hawes, who cited the combined pressures of economic and political turmoil triggered by Brexit negotiations and the upcoming VED tax rate increases in April.

“Registrations of around 2.5m would still be extremely strong when put in context – we are not talking about a dramatic drop-off,” said Hawes.

“But there are pressures there that we expect will have an effect. Already, the currency fluctuations against the Euro have led to many manufacturers putting prices up, there is the prospect of an interest rate rise during the year that could affect consumer confidence and the VED changes will have an impact on buyers of cars above £40,000.”

While many of the rises could be absorbed by manufacturers vying for business in a still ultra-competitive market, Hawes hinted that the large discounts of recent years may tighten. “When the UK demand was strong but the rest of Europe was still struggling, the incentive was there to push supply to the UK at keen prices – as that swings then the levels of discounting are bound to harden,” he said.

Explaining the boom in sales in 2016, Hawes added: “Consumer confidence has remained strong despite a number of challenges for the industry, economy and politically over the past year. That has combined with low interest rates and a raft of new model and new technology launches to deliver more choice of better vehicles than ever.”

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